■At 



/Us 



i 2830 
16 
py 1 



t/ 

SCHOOL ACCOUNTING 

A Practical Bookkeeping System 
for a Small City 

By 

J. A. ALLEN 

Business Director of the Board of Education 
Terre Haute, Ind. 



Reprinted from 

The American School Board Journal 

cTWilwaukee, Wis. 



Copyright 1913, 
By Wm. Geo. Bruce 



EIREB FRO] 
3FY3JQHT 



MAY 3 1915 






School Accounting 



An authority says: "An account is a state- 
ment in general of reasons, causes, grounds, etc., 
explanatory to some event; a statement of facts 
or occurrences." But, the definition of more 
importance to one concerned in the keeping 
of accounts is the definition that "An account 
is a statement, an explanation or vindication of 
one's conduct with reference to judgment there- 
on." 

In the keeping of accounts, as in everything 
else, we should work with a clearly defined 
object in view. An account is a record of trans- 
actions with persons, property or things ar- 
ranged to show a definite result. The results 
are the things we are interested in. If an ac- 
count is a record of transactions with persons, 
property or things arranged to show a definite 
result, the definite result shown may be juggled 
to express what is in the mind of the one keep- 
ing the account. This emphasizes the impor- 
tance of system. Objections are often made to 
some systems that the least variation in the 
manner of carrying them out causes confusion. 
This is one of the strongest arguments in favor 
of system ; the more difficult it may be to depart 
from the regular routine of carrying it out 
makes it imperative that, once a system is in- 
stalled, it be carried along without deviation. 

Some of the best accountants are men who 
have learned their lesson from actual experience. 
It is undoubtedly true that a knowledge of 
fundamental principles of accounting science is 
indispensable in the creation of thorough sys- 
tem. Practical experience, thorough analysis of 
conditions and clear perception of what is most 
essential in the business, and a clear under- 
standing of what the final result should be are 
equally important. 

Especial Problems of School Accounting. 

School accounting in its nature is peculiar. 
Many conditions surround the question of ac- 
counting in the schools that do not occur in a 



private corporation. Each fund must be used 
only for the purpose provided by law. One 
fund may be used for a number of purposes, 
while another may be for a specific purpose only. 
The idea that one must merely be a bookkeeper 
to step into an office and systematize the work 
is an erroneous one; a fair knowledge of exist- 
ing conditions is necessary. This is true in the 
management of any office. When a business 
man requires the services of an accountant, it 
is seldom, indeed, that an outsider is brought 
in to take the management of the office. Usu- 
ally we find the head of the department is one 
who has grown into the business, ofttimes start- 
ing from the bottom and thereby gaining a 
thorough knowledge of the work. "Make haste 
slowly" certainly applies with peculiar empha- 
sis in departing from established office methods 
to the establishment of a new system. 

In attempting to reconstruct the accounting 
department of any office, and particularly a 
school office, it is absolutely necessary that one 
should thoroughly understand all the conditions 
surrounding the work before an attempt is made 
to change the form of accounting. Certain fun- 
damental principles may be insisted upon from 
the start, but it is a grave error to try to ac- 
complish the task of establishing an entirely 
new system in a short time; to do so causes 
confusion, waste of energy and additional ex- 
penses brought about by the use of books, forms, 
etc., which later experience will prove to be in- 
adequate for the purpose for which they were 
intended. 

School accounting embraces more than the 
mere keeping of accounts, ranging from the or- 
ganization of the working forces, outside of the 
office, the buying and selling to departments, to 
the management of the accounting. 

A study of the systems in vogue in a number 
of public offices discloses the fact that the sys- 
tems of the business offices differ very greatly. 
In fact, it is hard to find two cities using two 



systems that are at all similar, except as to fun- 
damental principles. Being more familiar with 
the system in use in the schools of Terre Haute, 
the writer will endeavor to give as clearly as 
possible a brief outline of the work as now car- 
ried on. 

Importance of Accounting. 

The principle which the managers in the 
business offices of schools should keep before 
them at all times, is that they occupy a posi- 
tion between the board and the public; their 
conduct and manner of performing their duties 
are often responsible for the standing of the 
board members with the public. The manage- 
ment of the financial department of a school is 
either a protection or a menace to the board of 
control. We should keep in mind that the 
Board of Trustees is legally responsible for the 
acts of those intrusted with the work. It should 
also be borne in mind that the reputation of 
the one placed in charge of the accounting de- 
partment is at stake. We not only should be 
careful in the keeping of accounts, but should 
be able at all times to prove the correctness of 
them. Probably more difficulties are brought 
about through carelessness and through the 
inability of the accountants to prove what 
they have done than from any other cause. 
This being true, it is very important that the 
work not only be carefully done, but that it be 
performed in such a manner that we are able 
to prove beyond a doubt, at all times, that what 
has been done is correct. 

We should have a thorough understanding of 
the system so as to be able to prove beyond 
a doubt each step in all transactions. If pos- 
sible, copies of the original entries should be in 
the "Minutes" of the board. If this is done, it 
places the responsibility entirely with the board 
of trustees who approve the minutes. It is of 
the utmost importance that all matters pertain- 
ing to the receipts and expenditures be brought 
before the Board of Trustees for its approval. 
It would cause delay and would not be at all 
practical for the board to pass on all expendi- 
tures for repairs, supplies, etc., prior to each 
transaction. But reports should be presented 
to them for their consideration at regular per- 
iods, the same to include a report of all work 
of any description, all receipts and expenditures 



and this should be made a part of the perma- 
nent record of the board. As an additional pre- 
caution, the board should be asked to scrutinize 
their "Minutes" very closely. We find it a good 
plan to make carbon copies of the minutes for 
each member of the board. This enables them 
to look over the record and suggest any changes 
they desire. 

The "Exhibit Ledger". 

Journals and Ledgers are rapidly giving way 
to the "Exhibit Ledger." With an Exhibit 
Ledger, a simpler exhibit of all accounts can be 
made. An Exhibit Ledger especially con- 
structed for the work in school accounting is 
one which shows the warrant number, the name 
of the payee, the invoice number and the total 
amount of the warrant in the order named. 
This gives us the first division of the ledger. 
Next in order, reading from left to right as 
before, should follow the different funds, such 
as library fund, tuition fund, sinking fund, 
etc. To the right of this section should be a 
column in which to show the balance of all 
funds. The third section should show such ac- 
counts as supplies, repairs, printing, lights, tele- 
phone, coal, etc. The head of these accounts, 
beside showing the name of the account, should 
be numbered consecutively. It is advisable in 
making an Exhibit Ledger of this kind to have 
quite a number of blank columns, to the right 
of the regular printed accounts, to take care of 
any emergency that may arise. To the right 
of these accounts should be columns headed with 
the name or number of the school buildings, 
and between each column, a smaller column 
with the heading "Account Number". In the 
third section it was explained that the different 
accounts should be numbered. By having an 
account number column in the fourth section it 
is easy to check backward and forward. 

It is often said that a system of accounting 
adapted to the needs of a small office is im- 
practicable in a large one. This is, in a great 
measure, untrue, especially when Exhibit Led- 
gers are used. The Exhibit Ledger here de- 
scribed can be used in a city of 5,000 popula- 
tion and is equally as valuable in a city of 
200,000. Consider the advantages of having in 
one book a true exhibit of all the business. Take 
into consideration the time saved and the fact 



that the task of getting a trial balance at the 
end of the month is no longer the nightmare of 
your office. There is not an hour in the day 
that you are not preparing your trial balance 
with the use of the Exhibit Ledger, such as 
here described. First, you have the total amount 
of the warrant drawn, next the fund from which 
it is paid. These two sets of columns must bal- 
ance. The next distribution is to the different 
accounts. The total of this set of columns 
must balance with the fund columns and total 
of warrant columns. The next distribution is 
to charge the different items of expense to the 
department or school for which the money is 
spent. The total of these columns must bal- 
ance with the total of the account columns, and 
balance with the account of the fund columns 
and with the total amount of the warrant col- 
umn. The totals of all columns should be car- 
ried forward. At the end of the calendar month 
you have before you an exhibit of the work, 
which with the use of a regular journal and of 
ledger accounts, would take considerable time 
to obtain. 

Additional Uses of Ledger. 

An Exhibit Ledger can be made to add to its 
usefulness by using the same blanks before 
described. Enter the month in the date column, 
and in the total amount of warrant column enter 
the expenditure for the month; in the fund 
columns, show the total expenditure from each 
fund; at the right of the fund columns enter 
your balances; under the different accounts, 
such as supplies, repairs, etc., as before enum- 
erated, enter the amount chargeable to these 
accounts, and further extend the work by show- 
ing the distribution of expenditures to the de- 
partments, schools, etc. At the end of the year 
you have a true exhibit of the receipts and ex- 
penditures, to whom paid, the cost of main- 
tenance, supplies, etc., and the cost of main- 
taining each department, without additional 
work. 

The laws of Indiana provide that all public 
offices receiving and disbursing public funds 
shall keep a book which shall show the name 
of the payee, from what fund payment is made, 
and daily balances. If an Exhibit Ledger, such 
as before described, is used, it meets the re- 



quirements of the law and no additional book is 
necessary. 

One of the columns in the exhibit ledger is 
described as the invoice column. This is found 
to be of great assistance in tracing an invoice. 
If invoice books are used, the invoices are num- 
bered consecutively and the number of the in- 
voice is carried to the column in the exhibit 
ledger. It is easy then to refer to the Exhibit 
Ledger for any invoice by linding the number 
and then finding the corresponding number in 
the "Invoice Book". A still further check may 
be had by making extensions in the invoice book 
and taking the total at the end of the month, 
which added to the payrolls which are usually 
kept in the invoice book, will give the total 
amount of the expenditures for the month, and 
must balance with the total expenditures shown 
by the Exhibit Ledger. 

Buying School Supplies. 

Particular care should be taken in ordering 
goods and vouchering. Goods should be bought 
only on an order issued from the office and a 
duplicate of the order should be retained. Some 
offices go farther than this and make out all 
orders in triplicate and quadruplicate. This is 
only necessary in securing the vouchers from 
the different departments showing the transac- 
tion. First, the placing of the order, second, 
the receipt of the goods, third, a voucher as to 
quality, fourth, a voucher as to entry in the 
"Stock Book" of the goods received. A more 
simple plan, and entirely satisfactory with us, 
is to make the orders in duplicate, one to be 
sent to the merchant and the other to be re- 
tained in the office. When the goods are re- 
ceived they should be entered into the stock 
book kept for the purpose, showing the firm 
making the delivery and the amount of material 
delivered. The merchants should be required 
to return the order to the business office along 
with their invoice. This should go first to the 
stock -keeper, who vouchers it, then to the per- 
son in charge of prices, etc., who vouchers it, 
and then to the bookkeeper. When the invoice 
and original order is received from the mer- 
chant, the original order should be compared 
with the duplicate order retained in the office. 
These duplicate orders are valuable in obtain- 




Fig. Al— Page A. 




Fig. A2— Page B. 




Fig. A6— Page F. 



Exhibit Ledger Form Used in t 



Fig. 1. A 1-2-3-4-5-6 represents a siDgle "page" of the "Exhibit Ledger'' used, in the 
Terre Haute schools. Each warrant entered on Page A is distributed to respective account anc 

6 





t [ te" 


.«.,,, 


-sr? 


»«..., | «„., 


"K7 1 


A sr 


"sr? 1 


«"» 


sr 




.« T 


« 


*nTis' 


w 






*£»' 


nTm 






»- [»"•»-» 


™„ 






Rc«. S 


K* 


«* 


ri 


£-,■ 


p i™°"' 


F °Sd™ 


-* 


^ 


«- 


"3" 


- 


- 


»— 


SK 




— 


"sac 






























































































































































































































































































































































































































N 




































































J. - 








































Fig. A3— Page C. 




Fig A5— Page E. 




■rre Haute, Ind., Public Schools. 

chool so that the total outlay for each can be seen at a glance. The "ledger" permits of keep- 
ag the books posted up at all times so that an accurate trial balance may be taken when desired. 

7 



ing former prices, etc. If invoice books are not 
used, a still better system is to have a single 
sheet which should provide a space for the 
vouchering, and after the proper vouchers have 
been obtained the invoice should be attached to 
this sheet. The sheet should be of proper size 
to fold neatly to a convenient size of about 3x8 
inches. These invoices and voucher sheets are 
then filed and after receiving the return war- 
rant from the bank, the cancelled warrant 
should be attached to the voucher sheet and 
invoice. This gives a complete explanation of 
the transaction, provided the plan of obtaining 
the board's approval of the different steps has 
been secured. 

Discounting Bills. 

A custom in most cities, which should be 
abandoned, is that of paying bills at stated 
periods. No business house would try to en- 
force such a rule as this. To do so means the 
loss of considerable money as it is impossible 
to take advantage of the discounts usually 
offered. By all means, bills should be paid as 
they fall due. To do this, it is advisable to have 
an auditing committee consisting of one mem- 
ber of the board. This will not work a hard- 
ship on the board from the fact that it is sel- 
dom necessary for the auditing committee to 
meet more than twice a week to pass on the 
bills before they are paid. By having but one 
member of the board on the auditing commit- 
tee, the work can be divided among the different 
board members so as not to prove burdensome. 

An objection is sometimes made to this plan 
from the fact that it is necessary to give the 
bead of the department of accounting a number 
of warrants signed in blank. To overcome tbis, 
the one in charge of the accounting department 
should be under heavy bond, and the secretary 
and treasurer should limit the number of war- 
rants to the number that would probably be 



needed. These warrants should be listed by 
number, and when used a report should be made 
to the auditing committee showing the number 
used and the number remaining on hand. This 
together with all invoices and a report showing 
the complete transaction, should be placed be- 
fore the auditing committee when his voucher 
is secured. This completed exhibit should then 
be presented to the board at its next meeting 
for approval. 

Monthly Statements. 

Often one of the difficulties of the school 
boards is that they do not at all times know 
exactly where they stand as to finances, the 
probable amount of expenditures for a given 
period, and the receipts for the year. To over- 
come this, it is a good plan to call a meeting 
of the board just before the beginning of the 
fiscal year to define a policy for the coming 
year and to make appropriations to each de- 
partment and to each account. If this is done, 
the first entry in the exhibit ledger should be 
the appropriations filled in at the head of the 
column with red ink. 

At the end of the month, two statements 
should be prepared for the board and a copy 
delivered to each member. First should be the 
financial statement showing the receipts and 
disbursements for the preceding month, the 
balance at the beginning of the month, the bal- 
ance in the different funds at the close of the 
month, and the balance of all funds. The sec- 
ond report should show the cost of operation 
for the past month. It is possible to prepare 
a report of this nature if careful attention is 
given to details, without making it too large or 
bulky. It can be prepared to show a true 
exhibit and condition of the business at a glance. 
The report should be ruled to admit all the 
names of the schools or departments in the first 
column to the left, commencing at the top 



TERRE HAUTE PUBLIC SCHOOLS 

Receipts and Disbursements for the Month of 191 






T— | —--;;" 


^xnvss \ —>™. 


1 »i?' ij 


r. !.,,.„ t l<n 
































I 






li 


















- 
























1 






1 






















■LJj 


J 


























<J_~ 


.— L- Li ' 








J-> '\\_ 







Fig. C. Monthly Report Form for Receipts and Disbursements. 



working to the bottom of the page. The dif- 
ferent account heads should be in the columns 
standing full length of the sheet. If this is 
done it is easy to obtain a complete review of 
the work for the preceding month. To prepare 
these reports let us suppose that the schools 
instead of being named are numbered. On the 
first horizontal line will appear school number 
one; second, school number two and so on down 
the page until all the schools are enumerated. 
In the columns at the top should appear such 
items as supplies, books, repairs, heat, light, 
telephones, etc. The total of the figures read- 
ing from left to right of the school numbers 
will give the cost of operation for that particu- 
lar school for the month. The total of entries 
under any particular account-column will show 
the cost of the account for the month. The 
total of the extensions at the extreme right of 
the school number will give the cost of opera- 
tion for the month. 

Filing Papers. 

Particular attention should be given to the 
filing of all papers coming into the possession 
of the business office. A very successful plan 
with us has been to open a "Document Book" 
wherein are recorded all papers filed, except 
such papers as come before the board and are 
kept with the proceedings of the board. These 
papers are filed alphabetically. Instead of re- 
ferring to the different files and searching 
through a number of papers for the one wanted, 
we first consult our document book. Suppose 
the paper wanted to be a notice of "Street Im- 
provement concerning the Deming School." In 
our document book, under the D's, is entered 
"Notice Street Improvement" file 16. This 
system of keeping a record of all documents 
filed is as essential in a small office as in a 
large one. 

We should not lose sight of the fact that in 
our attempt to eliminate details to a minimum, 
with the use of the Exhibit Ledger, that a num- 
ber of supplementary books must be kept. A 
cash book, of course, is indispensable. In con- 
nection with the cash book should be used a 
receipt book. All moneys received by the office 
should be receipted for and the stubs retained. 
These stubs assume vast importance at times, 



especially when your office is undergoing an 
investigation by the state department. 

Teachers' Payrolls. 

One phase of the work that has proven a 
source of worry and dissatisfaction has been 
the different methods of meeting the monthly 
payrolls. This matter is not of as much impor- 
tance in a small place where there is from ten 
to forty persons to be paid, but when the num- 
ber of persons increases to three or four hun- 
dred, it becomes a different problem. Our meth- 
od of handling this matter has proven very 
satisfactory and has been approved by the state 
department having charge of all public offices. 
We prepare a payroll with the heading of "Re- 
ceipt" at the top of the sheet. To the left is 
the name of the employee; set opposite each 
name to the right is the amount due each per- 
son. This payroll is then sent to the bank with 
a check to cover the full amount of the pay- 
roll. Each employee calls at the bank and re- 
ceipts for the amount specified in the payroll. 
But one objection has been offered to this plan, 
namely, that no bank can be found that cares 
to do this work. An investigation, however, 
will undoubtedly disclose the fact that the banks 
are willing to do the work for the additional 
business and prestige it gives them. However, 
if it should be found that no bank cares to 
handle the payrolls in this manner, it is pos- 
sible for the business office to make payments, 
drawing a warrant for the full amount and 
placing the respective sums in an envelope to be 
given to the employee when the payroll is signed. 
This eliminates the stupendous task of drawing 
a warrant for each individual, and mistakes are 
reduced to a minimum, for the reason, that if 
warrants are used, the name of each payee, with 
the amount paid to them, must be copied from 
the warrant into the proper book. With the 
use of the above payroll plan but one entry is 
necessary. Probably in the following order: 

Teachers $31,000.00, distributed 

to the following schools, and only the totals of 
the different sums paid to the teachers of any 
one school must be entered. This system of 
meeting the payrolls saves time and work. It 
is accurate and far less subject to juggling than 
is the plan of issuing a warrant to each individ- 
ual employee. 



Distributing Supplies. 

As the business offices are in charge of work 
other than the accounting, careful attention 
should be given to all the different departments. 
The question of supplies offers a loop-hole for 
innumerable leaks. Leaks in any system should 
be sought for, and when discovered should be 
remedied at once. There is probably more 
chance for leaks in furnishing supplies than in 
any other department. To control this, all sup- 
plies should be entered in a "Supply Book" im- 
mediately upon receipt of the goods. Further- 
more, each school and department should have 
a separate account showing the amount of sup- 
plies furnished them. Before any goods are 
delivered to any department or school, a requisi- 
tion from someone authorized to make it should 
be in the hands of the business office. Suppose 
the requisition is to come from the Deming 
School and calls for chalk, pencils, ink, etc. 
In our stock-book we would turn to the Deming 
School account. This stock-book is ruled to 
provide a certain number of deliveries each 
month. We find that in the preceding months, 
among other things, the Deming School has 
been supplied with chalk, penci.s, ink, etc. 
All that is necessary then, is to enter in the 
proper column of the present month, the amount 
of each item to be delivered. At the end of the 
year the totals of the different columns will give 
the total amount of each article delivered. The 
total of each separate column for each school 
or department will give the total amount of any 
particular item delivered for the year. At the 
end of the fiscal year the total of the inventory, 
which should be taken at the beginning of the 
inventory, plus the amount bought, less the 
amount supplied to the different departments or 
schools, should give the correct inventory for 
the commencement of the next year. 

Handling Labor. 

Quite frequently a number of men, employed 
by the day or month, as the case may be, are 
under the charge of the business office. As it 
is impossible to personally superintend all the 



work, such as electrical work, carpenter work, 
minor repairs, plumbing, etc., it is necessary 
that some system be devised whereby the office 
may check up on all work done. To do this we 
use a time card showing first, the name of the 
person doing the work, second, the place where 
the work was done, third, the place where the 
worker left to go to the place where the work 
is to be done, fourth, the time it takes to go, 
from the place the worker starts, to the place 
where he does the work, and fifth, the amount 
of time it takes to do the work, and tools broken 
on the job. If some supplies are required to do 
the job the order must come from the business 
office and go to the stock room and the goods de- 
livered to the one doing the work. 

Whatever may be the system of accounting it 
should be carried out faithfully; if this were 
done there would be fewer defalcations. There 
is no way in which dishonesty can be practiced 
without detection, it cannot be covered up by 
manipulating the accounts. Loose, indifferent 
methods makes the one keeping them liable to 
suspicion and so I wish to emphasize the im- 
portance of keeping them properly. Do not be 
lazy but insist on each day's work being per- 
formed at the proper time. Laziness rather than 
incompetency is the cause of disorder in public 
offices. Do not be afraid of work, give full 
measure and insist on all in the department 
doing the same. 

Do not depend on the bank to keep the bank 
account ; require them to balance the bank books 
at the end of each month and keep a list of un- 
paid accounts. By doing this any discrepancy 
between office accounts and the bank account 
can be discovered at once and corrected. 

It has been my purpose in this article to 
show the value of Exhibit Ledgers in school 
accounting and to emphasize the value of the 
personality of a school accountant in relation 
to such work; his keen sense of order and sys- 
tem; his sound business judgment and tact; 
his power of initiative and fibre of completeness 
constitute an accounting system of value. 



10 



LIBRARY OF CONGRESS 

■If 

021 324 889 3 



